ECONOMIC

PLAN NOW, HARVEST LATER. Will a new law reassure investor and make black South Africa richer ? When even South Africa’s stuffy wine industry talks about “empowerment”, it is clear that all sorts of firms now fell pressure to enrich more black people. One of the country’s oldest and grandest vineyards, Boschendal, is about to be bought by a consortium including a black shareholder. Is South Africa’s economy finally being “deracialised” ?

Not just yet, but a government-backed bill that goes to parliament on September 2nd [2003], aims to make it so. The Broad-Based Black Empowerment bill, likely to become law this year, is a comprehensive effort to saw exactly what firms are expected to do.

So far official policy has focused on shifting some capital from white to black hands. That helped a few well-connected blacks businessmen to extract lumps of wealth from white firms eager to curry favour. It did nothing for most black South Africans. “Black-chip” shares remain a lacklustre segment of the Johannesburg stock exchange. So the government wants to get black employees into share-ownership programmes. And it wants broader change, including faster transfers of skills and more jobs for unemployed blacks.

This is a huge project, and only some of details of the legislation have been agreed. It will give legal clout to industry charters that promote the interests of black firms and workers-such as the existing mining charters that aims for 26% mining capital to be in black hands within a decade. Most mining firms are ahead of schedule with capital transfers, perhaps because failure to comply might result in losing their mining licenses.

Local banks are especially touchy because foreign financial institutions, with growing interests in South Africa, wants exemptions from capital transfer. On August 22nd, Lionel October, a trade-ministry spokesman, promised that, “ as for multinationals, we do not expect them to dilute any of their structures.” Instead they would be asked to provide more training for black workers, or to firm joint ventures with local, black, firms.

Other firms that need licenses, or official contracts, will face a stricter code. Bidders for licences in the 7 billion rand ($950m) a year gambling industry must meet minimum pro-black standards. In every industry, a trade-ministry scorecard will set standards, weighing three main factors equally: black ownership and management: skills and jobs creation: use of black suppliers and joint ventures.

Existing officials procurement rules will be strengthened. They already favour black firms: this week [August 30th 2003] the government said it will spend 80 billion rand over 15 years to renovate ports and other transport links. Many contracts will go to construction firms that are at least 26% black-owned.

None of that will especially please investors, but it should give them greater certainty about policy. Earlier this month, diamond tycoon Nicky Oppenheimer, of De Beers, launched his Brenthurst initiative on black empowerment with a call for closer ties between business and government. Officials have so far ignored his appeal for tax cuts for firms that comply with pro-black targets.

THE ECONOMITS, August 30th 2003

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